http://money.cnn.com/2003/11/17/news/terror_futures/index.htm?cnn=yes
Y’know, I sometimes wish that I could become the Clue Fairy and apply the Magic 2X4 at will.
How is this different from say… gambling?
I’m going to bet $200,000 on a bomb in Atlanta on April 14th. Now i got to look online for information on how to make bombs and rent a ryder truck in Atlanta.
(puts on flame retardent undies)
It’s actually a good idea. It was a good idea when originally introduced, and I’m glad it’s back.
First, the idea was conceived not by Bush, but by DARPA. DARPA is the Defense Advanced Research Projects Agency (part of the DoD), and has some of the smartest people on the planet working for it. DARPA is responsible for nifty things like stealth technology and the internet (the original version of which was called… ARPANET). Other DARPA inspired or funded projects include things like ATM, Wave Division Multiplexing (WDM) TCP/IP, BSD (yes, the Unix operating system) and gigabit packet switching. DARPA is not generally known for dumbness or publicity seeking. (Unlike many politicians). It’s important to understand that. If DARPA says something is an idea worthy of a trial then… it probably is. It’s at least worth looking at in more depth to understand what the hell they’re actually talking about. They have the track record of success. To the point, neither of us would be posting on this BBS without their work.
Their idea was that there’s value in spotting trends, especially when it comes to thing like terrorism or governmental actions. Market analysis may be a good tool for that. It may, in fact, be a ** very ** good tool for that.
Heres why:
The problem with using the analysis of any one person is that they bring all their associated baggage with it. As well, it’s very difficlut to sort the wheat from the chaff in terrorism information.
However, when a ** group ** of individuals, based on experience in economics and culture etc, are all indicating that they believe there is a likely event about to occur in Egypt (or London, for that matter) then that’s a pretty handy thing to know if you’re in the attack prevention business.
Futures analysis of this type has the ability to tell us where probable issues are, and it rewards those people who are right more often than not. Why they are right is not as important as the fact that conciously or unconciously they have figured out how to sort the wheat/chaff correctly. Whether it’s weather futures or terrorism/conflict futures… they’ve turned the corner on spotting indicators of activity That makes their viewpoint valuble in terms of preventing issues. Identifying these people is important, and this does that.
Consider, would you rather listen to an analyst who has a proven track record of being right, or rather not know this person exists and end up listening to some hack who really hasn’t a clue but has a PHD and knows people who know people? It’s in all our interests to find the real person, and dump the hack. Futures markets are an excellent way of doing that.
As has been said they can be ** uncannily ** accurate.
As to Tars’ comment, you make an excellent point. Unfortunately (and with respect) it’s a point about not understanding how the system works. This is a common problem associated with the issue, so don’t feel alone, but it’s driving your response.
Lets say you did what you did. You futured 200k on a bomb going off in Atlanta in the next month and lo and behold one does. Now let’s see, in order to make that futures trade you had to identify yourself, your bank, and all kinds of other information. Guess what happens when you go to deposit the check.
Can you say “cuffed and stuffed”?
I knew you could.
It’s unlikely at best that actual terrorists would try and manipulate the futures market, despite the knee jerk reaction of folks who don’t look any deeeper than the title. ** If they actually did so, all it would do is lead the authorities straight to them and their bank accounts. ** It’s not like some cash betting parlor action.
As well, as a practical matter in the original proposal (and probably in this one) there are limits off of how much any one person can make off of any futures trade. The idea was never to make serious money in the first place. It was to get consensus viewpoint from multiple people (including experts) in a way where they had a personal (albeit small) financial stake in the outcome. This was for motivation, to treat it more seriously since they have the ability to ** lose ** their money as well as make some.
Under the original proposal, if you bothered to read the details, you’d see that there was no practical way to make a living off this futures market though. The max cap on futures return was too small. The money angle was simply to move it out of the realm of pure academics, and get peoples best guess based on a motivating factor (the ability to make some small amount of money if they were right).
And the guy/girl who is right 70-80% of the time floats to the top. Their view gains more credibility over the windbags who talk much but really don’t grasp what’s going on behind the scenes. And that’s a good thing.
To recap:
- Helps to spot likely trends and occurances.
- Helps to spot people good at interpreting data correctly and making predictions on likely events.
- No financial inducement to commit a crime unless you’re a moron.
- If you or Osama was dumb enough to try to do so they’d have your bank records and ID info and that could open up a whole world of leads (and you bet your ass they’d freeze ALL your financial assets in a heartbeat).
It’s a good idea.
Regards,
-Bouncer-
How is any future market different from say…gambling? As to Tars Tarkas’s concerns, from the article:
Personally, I don’t see any problem with this. If the efficeint market hypothesis is right, then this market may be a useful tool.
Our thread that discussed the original proposal, along with some of the technical and thoretical background for the concept, is found at:
MENA Futures: DoD et al open futures markets on political & econ developments
After initial enthusiasm, Collounsbury noted that as described, the plan seemed a bit too focused on specific (not easily predicted) events rather than on the broad scope where it would actually be useful. A bit later, he noted that he and a colleague had figured a way to manipulate the market, and withdrew his support. If the current plan addresses those issues, I wonder if it is not still a good idea. (Alternatively, if it does not address those issues, I wonder if it is still a boondoggle.)
Bouncer - Your faith in DARPA is disturbing. Yes, some exceptionally clever people work there, but no, that doesn’t necessarily make them shit gold.
A futures market in Terrorism is all fine and good if you get around several problems:
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The market is not a magical bag of Truth that will squirt hot Knowledge all over our face when we play with it. Western society has had a strong prima facie belief that The Market is the best way to do all sorts of things- fuel progress, lower prices, make breasts larger. But markets boom and bust, markets are full of irrational actors, markets get manipulated by powerful private interests… the emergent behavior DARPA is looking for won’t necessarily result quickly or at all. Emergent-behavior systems(seperating the wheat from the chaff) take a LONG time to train and produce results. Will we still care so much about terrorism in 50 years?
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Even if a terror market DID produce good terror-predictors, the government would be obligated to screw it up. If one company was turning a PROFIT on the terror market on a regular basis, they’d be closely scrutinized. The government would be looking for links to terror, or perhaps just figuring out what these private individuals know. Government emulation or private contracting would remove the successful fish from the terror market pond.
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The terror market is an end-run around the Constitution. Private individuals can do all sorts of nasty things to other private individuals that the government cannot. If the Feds hire a thug to case your lawn and take pictures of the inside of your house with a variety of night-vision, heat-sensitive cameras, that evidence will be (maybe) tossed out in court under the 4th Amendment. If a private company hires the goon, the evidence is admissable and the company might be forced to pay a fee for tresspass if you can bring em to civil court on your own. Encouraging private companies to carry out investigation, spying, and espionage (if you want to find out more information about leads on terrorism, what would you, as a corp, do?) is tantamount to letting the market decide what civil rights you have.
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Existing government agencies should be “seperating the wheat from the chaff” on their own. The CIA and FBI have broad powers and a large number of agents- they should certainly be able to lean more heavily on investigative techniques that work than those that do not. If you believe our intelligence system is outdated or bogged down by it’s responsiblity to the public, then take your debate to Congress to change it. The experiment is already running- all we do by moving it away from the Feds is put it in Magical Market Land where everything is faires, rainbows and unicorns drooling honey.
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Terrorist organizations would attempt to take advantage of it. In the past (And probably today as well) laundered money from terrorist groups was played on the US stock market, and I dont see any reason that a similar problem couldn’t occur with a terror market. Especially if the market was world-wide; it will be very hard for the US to track down that offshore bank account and figure out where the money comes from. The problem gets multiplied dramatically if many players come to the table; the government isn’t going to devote it’s full resources to tracking down the funds for ALL betters.
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The plan is morally akin to the state of Minnesota taking bets on which terminally ill patients in a local hospital were dying first. If the bets turn out to be correct, then the patient still dies- all that happens is that the winner gets a financial windfall. It’s not going to save any other lives, because the people placing bets are only going to put them on terminally ill patients anyway. Public money can go for a better use.
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The feds are assuming what is possible to know by setting the level of generality in advance. I imagine you can’t bet on ANYTHING. What sort of bets are you allowed to make? Can I bet on “unrest in the middle east?” Can I bet on a “suicide bombing in Isreal next month?” Or do I have to bet on “Joe being hit by shrapnel from a car bomb at 12pm Friday”? If the feds pre-define what categories you can bet on, or tweak the substance of the bets, then we’re losing the whole point- the market is NOT defining terror targets, the US is.
-C
Wouldn’t the goals of this market conflict with the goals of it’s investors? I’m not trying to argue one way or the other on this just yet – right now I’d like to understand it better.
In the linked article and thread, references were made to other futures markets used to predict presidential elections and weather patterns, as support for the effectiveness of a potential Terror Market. Isn’t the Terror Market fundamentally different from these other systems, in that the ultimate goal of the system is not just the prediction of future events, but the prevention of those events?
When the futures market for predicting presidential elections makes a strong prediction that Al Sharpton is going to win the next election, the goal isn’t for the relevant government agencies to mobilize to prevent Al Sharpton from becoming president. The election continues unimpeded, and if the prediction turns out to be true, then those investors who bet on Al Sharpton realize the returns on their investment.
On the other hand, if the Terror Market makes a strong prediction that there will be a major terrorist attack at the next Summer Olympics, presumably, the relevant government agencies would get to work unraveling that plot. If we are unable to foil those terror plans, then the market isn’t actually doing us any good. On the other hand, if we are able to foil the terror plans, we are basically shooting our best predictors’ investments in the foot. This seems to be a major conflict of interest between the goals of the Terror Market and the investors it relies upon for success. How will that affect the Terror Market’s viability?
Oh, and another question: who realizes the greatest benefits from the Terror Market, anti-terrorist organizations, or the terrorists themselves? Assuming that the system works, anti-terrorist organizations gain an effective and efficient tool for summarizing and analyzing the data they possess. The terrorists, on the other hand, gain an effective and efficient tool for summarizing and analyzing the data their enemies possess. Yikes!
Hey Osama, want to know how that disinformation campaign is going? Check the market. Want to know if we’re on to your plans to bomb that embassy? Check the market.
Perhaps the plan is to keep the market information confidential, but that doesn’t seem feasible. Every investor needs a complete market picture to do his job, making each one a potential security risk. Given the kind of contacts these investors will need to feed valuable information into the system, and the number of investors required to make the system statistically viable, it seems reasonable to assume up front that the information is not secure.
A hilarious but somehow troubling metaphor…
Don’t futures like this help businesses deal with risks from terrorism, etc.? I believe the primary purpose of weather-related futures is not to predict the weather, but to allow owners of weather dependent ventures, such as ski resorts, to reduce their losses if there is some freak event (e.g., no snow all winter).
The market should take this into account when setting the price. The fact that the government is taking steps to stop terrorism is one of the cheif things to consider when trying to decide how likely it is that an attack will occur. My understanding is that the market would not try too predict specific events, but I don’t know if something like an olympic bombing would be considered too specific or not…
The markets for this already exist, in the safe havens that people turn to in times of stress: US government Treasury bonds, and gold. To the extent that these things can be predicted, they will be in the price of assets like these.
Obviously, in both cases, the signals will be mixed up with all sorts of economic signals as well. But it’s the best we can do without screwing around with the risks cited above.
Maximum C,
I don’t think DARPA poops gold bricks, though it’d certainly solve their funding issues if they did. 
What I meant is that I trust DARPA a whole hell of a lot more than I trust some politico looking for the "outrage of the moment"™ on which to hold a press conference. That is to say, based on their track record, I feel confident that DARPA actually does, you know, RESEARCH and “stuff” to find out if an idea is feasible, and if it’s useful for defense applications. That’s their job after all, and they seem to be pretty good at it, from the accounts I’ve read. They, unlike the US Congress don’t have a big record of clusterfucking issues in order to get a little airtime. So I chose to trust that the idea has enough merit to be tried.
The original idea had it’s faults (as most new ideas do), but the more refined idea now being proposed may be useful in predicting trends and large events. For instance, whether or not some government is likely to undergo a change in leadership in the next coming months. That is useful information since it affects the strategic interests of the US (and the world). It’s worth trying at least. If it fails it fails. We’re no worse off. If it succeeds, then we may be better off by avoiding issues or preventing them, and it’s worth the pittance of cost to at least try it.
I don’t speak to the morality issues, because when it comes to strategic concerns or national defense I side solidly on the practical versus the moral. That’s either cold and calculating, or realistic, depending on your point of view. I don’t really care if DARPA suddenly figures out how to predict events by reading goat entrails. If they do, then I weigh the cost/benefit of a 24hr glimpse of events versus the cost of a goats life. And the goat loses every time. That may upset PETA, but the cost is simply worth it to me when you’re talking about something that may impact millions of people and/or the economy of the US (and by extension the entire planet). I’d rather get that glimpse of likely future events that may impact the US and the world, and I’m not all that particular about how I get that glimpse.
As to betting on peoples lives or injuries, we do that every day by buying insurance. When I travel overseas I buy medical evacuation insurance. It’s a bet, but from my perspective, a good one. Stastically I’ll probably never need a private chartered flight back home with a nurse on board. But if the alternative is being in a hospital in some third world country? No thank you. The point is, that I (and I suspect the executive branch) would really rather know about the possibility and have some sort of a plan to deal with it, rather than being caught flat footed as happens so often.
Regards,
-Bouncer-